107Universal City Make Big Changes for GE and NBC -- U.S.
Post Office Vanishes
May 6, 2005 / Not only has the studio cut cost,
so has the City itself. The Universal City Post Office, Zip
91618 and the building TVI Magazine has been part of, has
completely vanished. In fact, says publisher, Josie Cory,
there is nothing left except a big hole where construction
workers found fossils dating back to 2 million BC.
While the contruction has been going
on, GE, NBC and studio executives in the newly merged
Universal Studio firms have had to explain their businesses
to one another.
People say that, "When General Electric
Co., NBC, and Universal Studios came together in a
$14-billion marriage a year ago, it seemed like odd
pairings. GE and NBC likes order and predictability;
Universal operates in a world where hunches and high-stakes
gambles are the keys to success.
But, like at the begining of radio
networking in the 1920s, it was a strange marrage between
the two, when GE formed NBC, with Steinmetz and Sarnoff in
charge, but as you can see, it worked out fine, they're
still together, now in Hollywood. Although the studio
threesome has made it to its first anniversary, all are
still getting to know each other's corporate quirks, not all
of which have been easy to accept.
Executives throughout the newly merged
company have become both ambassadors and teachers,
explaining the basics of their businesses to each
In January, at a management conference
for GE executives in Boca Raton, Fla., Universal Pictures
Chairwoman Stacey Snider did her best to educate about 650
executives from such far-flung divisions as medical
technology, equipment services and plastics. Her "movie
business 101" primer, as she calls it, included explaining
such Hollywood jargon as "tent-pole movies" and "franchise
Universal Pictures executives have had
their own steep learning curve.
Last fall, Snider's lieutenant, Vice
Chairman Marc Shmuger, was the studio's representative on a
three-week GE leadership course. He traveled the country
with other GE executives to study "global growth strategies"
at an assortment of non-entertainment companies with ties to
GE. When the visits were done, the team was required to
write up its findings.
"It was definitely different,"
recalled Shmuger. "I had to work hard to keep an open
Top executives say that, for the most
part, the integration of Universal with GE and its NBC
television operations has gone smoothly and profitably,
living up to the theme of the merger's anniversary: "One
Year, One Company, One Vision."
"I haven't seen any evidence of a
culture clash," NBC Universal Chief Executive Bob Wright
said in an interview this week. But he acknowledged that
"there's always going to be some people disappointed with
some aspect of something."
Most of the wariness and friction has
emanated from Universal's back lot, where GE has implemented
cost-saving programs and disrupted long-standing business
In a bid to get cheaper prices for
services, GE has instructed the studio to use the company's
"preferred vendors" for camera rentals, film labs, overnight
couriers and air travel, among others. Most purchase
decisions that had been handled by Universal's own
production managers and line producers now move through an
NBC Universal department headed by GE veteran Marcia Haynes,
whose most recent job was as an executive in the company's
advanced materials division.
"Our business is based and built on
relationships," said one unhappy Universal insider, who
requested anonymity for fear of jeopardizing his job. "Their
plastics business is based on how many contracts they can
get in China."
The change in outsourcing isn't the
only sore point among Universal staff members, many of whom
had grown accustomed to the rich perks a job in Hollywood
has to offer.
For the majority of executives, GE has
ended company-paid car insurance, car allowances and
subsidized gasoline from pumps on the studio's back lot. It
also has restricted business- and first-class travel for
many executives and no longer reimburses them for the cost
of pay-per-view movies in hotel
The merger also has brought changes to
Universal's severance pay. Employees used to get a month for
every year of tenure at the studio if they had been there 10
years or more. For employees hired after the merger, the
benefit has been reduced to two
In the last year, Universal also has
cut back on one of the industry's most cherished rituals --
giving lavish gifts to stars and filmmakers -- suggesting
that no present exceed $100. That's a pittance by the
standards of Hollywood, where agents and studio executives
frequently send gifts costing thousands of
Chairwoman Snider said although there
had been cost reductions throughout Universal, "there wasn't
a tremendous impact" on her film division.
Snider and her boss, Universal Studios
President Ron Meyer, successfully argued to the new brass
that if the studio was going to operate as a first-class
entertainment company, senior executives should be exempted
from some of the travel restrictions and crackdown on
Meyer said he and Snider explained to
Wright and GE Chief Executive Jeffrey Immelt "how our
business differs from GE and even
Meyer and Snider said Universal
Pictures had not been forced to slash its production and
marketing budgets or make deep staff cuts. Since last May's
merger, most of the 400 eliminated jobs came from
Universal's TV operation after it was combined with NBC's
network and cable units. Other layoffs occurred in the
studio's back lot operations and in professional services
areas such as legal and finance.
Snider said although Universal now
must estimate costs and revenues on a quarterly rather than
yearly basis, GE had not been vetting individual movie
budgets, as several sources close to the studio have
"They don't drill down into production
and marketing costs," Snider said. "They have not
scrutinized the budget of individual movies." Instead, she
said, movies are evaluated after their release based on how
they compared with original
So far, the math has worked in the
studio's favor, leading Wright to say that he has yet to see
the kind of volatility that often characterizes the movie
industry: "I don't judge the risk here as very high at
Universal, in fact, has had a solid
run with such box-office hits as "Meet the Fockers" and "The
Bourne Supremacy." The box-office haul from those movies not
only helped offset such disappointments as "Van Helsing" and
"The Chronicles of Riddick" but also helped cushion NBC's
fall from its perch as the No. 1 network among viewers aged
18 to 49, those most coveted by big
The question being asked around town,
however, is how GE might respond should Universal's fortunes
"I can't imagine that they would be
prepared for the kind of volatility that you get in the
movie industry," said Jim O'Toole, a professor of management
One area in which the studio's
executives have felt cultural changes and a geographical
shift since the GE takeover has been in the number of
meetings they're expected to attend in New
Snider has privately complained to
many colleagues about the many presentations she has had to
make and the increased demands on her time. "It's definitely
something to balance," she said, adding that she still has
time to focus on her primary
Snider also said that her boss, Meyer,
"takes a lot off my shoulders" by spending as much as two
weeks each month in New York.
"It's my responsibility," he said, "to
be the face of Universal."
And now, the face of
Times staff writer James Bates
contributed to this report.
Here are some of the expense
restrictions imposed since GE's takeover of Universal
Vendors: Must be selected from GE's
Cheap gasoline: Fill-ups from back-lot
pumps eliminated for most
Travel: First-class travel severely
Free car insurance/monthly car
allowance: Eliminated for most
Hotel movies: Pay-per-view movies no
longer expensed for most
Gift giving: $100 cap on individual
* Previously, top
executives could fill up their tanks and pay only the
Senior executives within movie
division are exempt from some new restrictions.
News 192005 / TeleCom Buy Outs and Asset Seizure
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